Legal principle

A CFS custodian/CCSP cannot escape liability for pilferage of seized goods in its custody merely because third parties had access; it must indemnify the value of the lost goods under Regulation 5(6) of HCCAR and is liable to suspension and penalty for failing to maintain proper security, control and records.

Court decision

The Tribunal dismissed the appeal. It held that the appellants failed to fulfil their responsibilities under Regulations 6(1)(a) and 6(1)(b) of HCCAR, that there was no illegality in recovery of the value of the pilfered goods under Regulation 5(6), in the 15-day suspension of CCSP approval, in the penalty under Regulation 12(8), or in the penalty under Section 117 of the Customs Act for violations of HCCAR and Section 141(2); however, the suspension itself became infructuous as its 15-day period had expired and had been stayed by the Bombay High Court.

Facts

M/s Speedy Multimodes Ltd operated a Container Freight Station at Nhava Sheva as 'custodian' under Sections 45(1) and 141(1) of the Customs Act, 1962, and as a Customs Cargo Service Provider (CCSP) approved under Regulation 10 of HCCAR, 2019. DRI intercepted container GESU 4913126 found carrying 93,60,000 sticks of smuggled foreign-origin 'Gudang Gram' brand cigarettes, which after examination under panchnama on 05.02.2019 was resealed with a Customs bottle seal and handed to the appellants for safe custody. A verification by CIU-JNCH and DRI on 08.12.2020 found only 70,27,200 sticks, revealing pilferage of 23,32,800 sticks substituted with packing material, stones and rugs. On an SCN dated 26.07.2021 alleging violations of clauses 5(1)(i)(n), 6(1)(f) and 6(1)(i) of HCCAR, the Commissioner of Customs (General), JNCH, by order dated 05.04.2023, suspended the CCSP approval for 15 days (16.04.2023 to 30.04.2023), confirmed a demand of Rs.2,22,67,440 being the value of the pilfered goods under Regulation 5(6) of HCCAR, and imposed penalties under Regulation 12(8) of HCCAR and Section 117 of the Customs Act.

Key provisions

• Section 141(2), Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Regulation 5(6), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 45, Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Regulation 12(8), Handling of Cargo in Customs Areas Regulations, 2009 — Procedure for suspension or revocation of approval and imposition of penalty
• Regulation 6(1)(i), Handling of Cargo in Customs Areas Regulations, 2009 — Responsibilities of Customs Cargo Service provider
• Regulation 11, Handling of Cargo in Customs Areas Regulations, 2009 — Suspension or revocation of approval for appointment of a Customs Cargo Service provider
• Section 2, Customs Act, 1962 — Definitions
• Regulation 10, Handling of Cargo in Customs Areas Regulations, 2009 — Approval of appointment of a Customs Cargo Service provider and review thereof
• Section 85, Customs Act, 1962 — Stores may be allowed to be warehoused without assessment to duty
• Regulation 13, Handling of Cargo in Customs Areas Regulations, 2009 — Renewal of approval for appointment of Customs Cargo Service provider